When I talk to my European utilities clients, the road to net zero is top-of-mind. And that’s no surprise, with the EU’s 2030 commitments, signalling a new level of ambition, and a new expectation of scale and speed.
Only nine years remain to meet the EU 2030 target of reducing greenhouse gas emissions by 55%.
So what’s different about this decade compared to the last?
Answer: it’s not just about ramping up supply of renewables. It’s now at least as much about demand for reliable, affordable renewable electricity, from consumers, businesses and governments. Why? Because reducing greenhouse emissions in the end happens where energy is being converted or used. If industry or individuals won’t or can’t use renewable electricity, then the supply doesn’t scale, and the target will be missed.
Ultimately, the energy transition will only work if it’s demand-led.
To unpack what that means... I’d encourage you to read the new ‘Electric Decade’ report from Accenture and Eurelectric. And to get the ball rolling, here I want to reflect briefly on the implications for electric utilities.
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It’s not just about ramping up supply of renewables… it’s also about demand for reliable, affordable renewable electricity.
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The electric decade: E becomes the new I
Electrifying society is really what we’re talking about. From electric trucks to electric heating to electric cities and beyond, electricity will be front and center.
And similar to the way “I” was used to signal intelligence built into a product, “E” will redefine new and converging industries. For example: electricity + chemicals + manufacturing = eIndustrials.
The biggest challenge and largest opportunity lies in decarbonizing industry. Think retrofitting an industrial plant to use green hydrogen. It’s potentially complex and more importantly time-constrained like never before.
It adds up to a need for the utility industry to not only decarbonize production, but also engage with their customers to provide decarbonization services and support them on their journeys.
Getting it right counts, with around 40% of industrial emissions candidates for abatement by 2050 through electrifying light industries alone. Industrial players are at the very heart of the demand shift we need to see.
The net zero consumer
But the individual consumer also has a major role to play in this demand-driven decade. And the COVID-19 pandemic has accelerated a shift that was already happening, with more than 50% of residential consumers saying they’re more likely to invest in energy efficiency now than before.
Many have overhauled their energy lifestyle at home over the last year, whether a home office in the garden or do-it-yourself solar. So much so, “do-it-yourself innovation” is one of the key themes in Accenture’s 2021 Fjord Trends (see the utilities perspective on the Trends).
In essence, the consumer is looking for more from their electricity provider: a new customer experience, a relationship beyond billing, and value-added services. Example: the electricity provider who also leases you an electric vehicle (EV), installs your charger (and decides when to charge your car for you overnight based on the grid), charges you a green tariff, and tells you the story about how your actions are abating emissions.
The scaling imperative
This all suggests innovation lies at the heart of the energy transition. Take carbon capture and storage (CCS), as one just one example.
But innovation alone isn’t the answer. It’s about scalable innovation. For example, electric and renewable heating solutions (e.g., heat pumps) can grow to meet close to 65% of residential heating system sales by 2030. And that kind of growth relies on highly scalable approaches for among other aspects, infrastructure and customer experience (e.g., the packaged services they’ll expect, in a seamless way).
Technology underpins so much of this. And leaders know they need it, but are yet to fully capitalize on it, with only around a third of utilities saying they’ve achieved value from their technology investments. But the timing is now right, with sustainability + digital coming together like never before—“twin transformation”—for new sources of value.
The foundation must be new ecosystems and new collaborations to facilitate the business models that are emerging, and must continue to develop. Think about mobility. The old model of car manufacturer building the car, the energy company providing the fuel (and no more) is over. New players and ecosystems must join up charging facilities (at the office or home—B2B and B2C); data, analytics and integration to manage customers and their new complex relationships with those who serve them.
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There is an ocean of great ideas out there on how to make the energy transition real. But the winners will be those who can select the right ones, double down on them, and execute at scale with C-suite support.
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It’s now clear the energy transition will accelerate in a whole new way. The ambition is huge, and the scalability of the solutions must match, as must the demand from B2B and B2C customers.
And electrification of society is mission-critical. And while it’s easy to explain how the world needs to look, it’s less easy to get there.
When I talk to my clients, I find myself saying this: there is an ocean of great ideas out there on how to make the energy transition real. But the winners will be those who can select the right ones, double down on them, and execute at scale with C-suite support. Scale is the name of the game, and the driver of success or failure.
The time to act is now because failure is not an option. We all have a part to play and together we can achieve our collective goals. I invite you to read our new report and welcome an opportunity to talk more about the way forward.